Federal Register #RHS-26-MFH-0298

USDA Rural Housing Service Multifamily Housing Preservation Pilot and Section 538 Loan-to-Cost Percentage Update

The USDA Rural Housing Service (RHS) is launching a Multifamily Housing Preservation Pilot and updating loan terms for rural rental housing programs. - Government Buyer: - United States Department of Agriculture (USDA) - Rural Housing Service (RHS) - Production and Preservation Division, Multifamily Housing - OEMs and Vendors: - USDA Rural Housing Service (program administrator) - HUD (referenced for documentation alignment) - Products/Services Requested: - Multifamily Housing Preservation Pilot - Programmatic variations and streamlined transfer processes for MFH Section 515 and Section 538 loans - Includes appraisal flexibility, credit report requirements, construction and design flexibilities, and risk-tiered underwriting - Focus on ownership transfers, including those using Low Income Housing Tax Credits (LIHTC) - Streamlined processing for low-risk transfers and expanded eligible uses - Impacts up to 200 Section 538 guaranteed loans and about 10% of the Section 515 portfolio - Loan-to-Cost Percentage Change - Increase in maximum loan-to-cost percentage for MFH Section 538 Continuous Guarantee loans from 70% to 80% - Aligns with market standards and federal agency practices - Unique/Notable Requirements: - Alignment with HUD standards for properties receiving HUD support - New requirements for appraisals, credit reports, developer fees, reserve requirements, and environmental documentation - Risk management adjustments and risk-tiered underwriting for Section 538 transactions - Pilot outcomes may inform future regulatory changes - No specific products, part numbers, or quantities are being procured; the notice focuses on loan program modifications and process improvements.

Description

The USDA Rural Housing Service announces a Multifamily Housing Preservation Pilot aimed at improving program delivery efficiency and preserving affordable rural rental housing. The pilot includes programmatic variations and transfer processes for MFH Section 515 and Section 538 loans, focusing on ownership transfers and risk management. Additionally, the notice changes the loan-to-cost percentage for MFH Section 538 loans under Option 3 from 70% to 80% to align with market demand. The pilot runs from October 9, 2026, to September 25, 2028, and seeks to reduce regulatory barriers and support long-term preservation of rural housing assets.

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